Voluntary Disclosure Program Lawyers in Toronto
Need to correct past tax errors or unreported income? Our tax lawyers assist individuals and businesses with CRA Voluntary Disclosures Program applications.
Considering a Voluntary Disclosure to the CRA?
The Canada Revenue Agency’s Voluntary Disclosures Program (VDP) allows eligible taxpayers and registrants to come forward and correct certain past tax errors or omissions before enforcement action progresses further.
A voluntary disclosure may involve unreported income, unfiled tax returns, foreign income or assets, GST/HST errors, source deductions, information-return failures, or other tax non-compliance.
If a VDP application is accepted, the CRA may provide relief from penalties and a portion of the applicable interest and will generally provide protection from referral for criminal prosecution relating to the information disclosed. The underlying tax remains payable.
At KR Law Firm, our tax lawyers assist individuals, businesses, corporations, and other taxpayers with CRA Voluntary Disclosures Program applications. We can assess eligibility, identify the issues that should be disclosed, organize supporting records, prepare the application and legal submissions, and communicate with the CRA throughout the process.
What Is the CRA Voluntary Disclosures Program?
The Voluntary Disclosures Program is a discretionary CRA relief program that gives eligible taxpayers an opportunity to correct errors or omissions in their tax affairs.
The program is intended to encourage taxpayers to come forward and become compliant rather than wait for the CRA to identify the problem through an audit, investigation, or other enforcement activity.
Depending on the circumstances and whether the application qualifies, relief may include:
- Relief from some or all applicable penalties;
- Partial relief from applicable interest;
- Protection from referral for criminal prosecution relating to the disclosed information; and
- An opportunity to correct past tax filings and bring tax affairs into compliance.
The VDP does not generally eliminate the underlying tax owing. Taxes resulting from the correction must still be paid, although a taxpayer may request a payment arrangement where appropriate.
What Tax Issues Can Be Disclosed Through the VDP?
Depending on the circumstances, the Voluntary Disclosures Program may be used to correct matters such as:
- Unreported or Under-Reported Income: Income that should have been reported on a Canadian tax return but was omitted or understated.
- Unfiled Tax Returns: Returns that should have been filed but remain outstanding.
- Incorrect Expenses or Deductions: Expenses, deductions, or credits that were claimed incorrectly.
- Foreign Income: Foreign-source income that was taxable in Canada but not properly reported.
- Foreign Asset Reporting: Failures involving information returns such as Form T1135, where applicable.
- GST/HST Errors: Failure to charge, collect, report, or remit GST/HST or the claiming of ineligible input tax credits, refunds, or rebates.
- Payroll and Source Deductions: Certain failures involving employee source deductions or related remittance obligations.
- Incomplete Information: Returns or filings containing incomplete or inaccurate information.
- Other Undisclosed Tax Liabilities: Other errors or omissions that fall within the legislation administered by the CRA.
Who Is Eligible for the Voluntary Disclosures Program?
The CRA considers VDP applications on a case-by-case basis.
Under the current program, an application generally must satisfy several conditions to qualify for relief.
The CRA currently requires that:
- The application be made before an audit or investigation has been initiated against the taxpayer or a related taxpayer regarding the information being disclosed;
- The taxpayer provide all relevant information and supporting documentation required for the applicable years or reporting periods;
- The disclosure involve an error or omission to which interest, penalties, or both apply;
- The information generally be at least one year or one reporting period past the applicable filing deadline; and
- The taxpayer include payment of the estimated tax owing or request a payment arrangement, subject to CRA approval.
Eligibility can depend heavily on the timing of the application and whether the CRA or another authority has already begun an audit or investigation relating to the issue.
When Is a Voluntary Disclosure Too Late?
Timing can be critical.
A VDP application is generally not considered voluntary if an audit or investigation has already been initiated against the taxpayer or a related taxpayer concerning the information being disclosed.
For VDP purposes, an audit or investigation is not necessarily limited to the CRA. Certain investigations by law enforcement agencies, securities regulators, or other federal or provincial regulatory authorities may also affect eligibility.
If you have received communication from the CRA, however, that does not automatically mean you are ineligible.
Under the VDP rules effective October 1, 2025, some taxpayers who have received CRA compliance communications may still qualify under the prompted application category, provided an audit or investigation concerning the disclosed issue has not begun.
For that reason, receiving a CRA letter should not automatically be treated as meaning that the VDP is unavailable.
Unprompted vs. Prompted VDP Applications
The CRA now distinguishes primarily between unprompted applications and prompted applications when determining the level of relief available.
Unprompted Applications – General Relief
An application will generally be treated as unprompted where the taxpayer comes forward without having first received CRA communication identifying a specific compliance issue relating to the disclosure.
An eligible unprompted application will normally receive:
- 100% relief from applicable penalties;
- 75% relief from applicable interest; and
- Protection from referral for criminal prosecution relating to the information disclosed.
Certain general educational communications from the CRA may not necessarily cause an application to be treated as prompted.
Prompted Applications – Partial Relief
An application may be considered prompted where the taxpayer applies after receiving CRA communication identifying a particular compliance issue, or after the CRA receives certain third-party information concerning possible non-compliance.
An eligible prompted application will normally receive:
- Up to 100% relief from applicable penalties;
- 25% relief from applicable interest; and
- Protection from referral for criminal prosecution relating to the information disclosed.
The distinction between a prompted and unprompted application can materially affect the relief available, making the timing and circumstances surrounding the disclosure important.
What Does the VDP Not Cover?
Not every tax correction qualifies for the Voluntary Disclosures Program.
The CRA indicates that applications will typically not qualify where, among other situations:
- The application relates only to a return that would result in a refund or where no tax or penalties are owing;
- The taxpayer is seeking relief only from penalties or interest that have already been assessed;
- The application seeks to make or change certain tax elections;
- An insolvency event affects the years involved in the disclosure;
- The matter relates to certain advance pricing arrangements;
- The application depends on a discretionary agreement involving Canada’s competent authority under a tax treaty; or
- An audit or investigation has already begun in relation to the information being disclosed.
Eligibility should be assessed based on the taxpayer’s particular facts rather than assuming that every historical tax error qualifies.
How Far Back Does a Voluntary Disclosure Need to Go?
The supporting documentation required with a VDP application depends on the type of non-compliance.
Under the CRA’s current guidance, taxpayers generally should include documents for:
- Foreign-source income or assets: the most recent 10 years;
- Canadian-source income or assets: the most recent 6 years; and
- GST/HST matters: the most recent 4 years.
Years or reporting periods within those ranges that contain no errors or omissions generally do not need to be included.
The CRA may nevertheless request information for additional years or reporting periods where appropriate.
What Information Must Be Included in a VDP Application?
A taxpayer applying under the Voluntary Disclosures Program must provide sufficient information for the CRA to understand and verify the disclosure.
Depending on the matter, this may include:
- Previously unfiled or amended tax returns;
- Income statements and financial records;
- Foreign income and asset documentation;
- Banking or investment records;
- GST/HST records;
- Payroll and source deduction information;
- Information returns and schedules;
- Calculations of estimated tax owing;
- An explanation of the circumstances leading to the non-compliance; and
- Other documents required to correct and substantiate the disclosure.
The taxpayer must disclose all known errors and omissions relevant to the application and respond appropriately to additional CRA information requests.
How to Apply for the CRA Voluntary Disclosures Program
The current VDP application process generally involves completing and submitting Form RC199, Voluntary Disclosures Program (VDP) Application, together with the supporting documents required to correct the non-compliance.
A taxpayer may submit an application directly or authorize a representative to submit and communicate with the CRA on their behalf.
The application should identify the nature of the non-compliance, provide the required corrective filings or documents, and include payment of the estimated tax owing or a request for a payment arrangement where applicable.
Anonymous Pre-Disclosure Discussions With the CRA
Taxpayers who are uncertain whether the VDP is appropriate may request a pre-disclosure discussion with the CRA.
A pre-disclosure discussion can generally be conducted anonymously and may provide:
- Information about how the VDP process works;
- A better understanding of potential eligibility;
- Information concerning the relief that may be available; and
- Insight into the risks of remaining non-compliant.
The discussion is informal and non-binding and does not guarantee that a later application will be accepted.
Because eligibility and relief ultimately depend on the full facts submitted with the application, legal advice may be appropriate before deciding how to proceed.
How Our Tax Lawyers Assist With VDP Applications
1. Assess VDP Eligibility Before Filing
We review the taxpayer’s circumstances, the nature of the non-compliance, prior CRA communications, and any existing audit or investigation activity to assess whether the disclosure may qualify under the VDP.
2. Determine Whether the Application Is Prompted or Unprompted
We assess the communications and events preceding the application because the distinction between prompted and unprompted applications can significantly affect the level of penalty and interest relief available.
3. Identify the Scope of the Disclosure
We help determine the tax years, reporting periods, transactions, income, assets, filings, and other matters that should be included in the application.
4. Organize Corrective Filings and Supporting Evidence
We work with the taxpayer and, where appropriate, accounting professionals to organize tax returns, financial records, information returns, calculations, and other documentation required to correct the non-compliance.
5. Prepare and Submit the VDP Application
We can prepare Form RC199 and accompanying legal submissions explaining the circumstances, eligibility position, and relief being requested.
6. Communicate With the CRA
Once authorized, our tax lawyers can communicate with the CRA, respond to information requests, address questions concerning the application, and advocate for the taxpayer’s position throughout the review process.
Do You Have to Pay the Tax Owing?
Yes. The Voluntary Disclosures Program provides relief from penalties, a portion of interest, and criminal prosecution relating to eligible disclosed information, but it does not generally eliminate the underlying tax.
A taxpayer is generally expected to submit payment of the estimated tax owing with the application or request a payment arrangement.
Approval of a payment arrangement is not automatic and is considered by CRA collections officials.
If payment of the resulting tax debt is a concern, learn more about our CRA collections and tax debt services.
Can a VDP Application Prevent Criminal Tax Prosecution?
If an application qualifies for VDP relief, the CRA states that the taxpayer will receive protection from referral for criminal prosecution concerning the information disclosed.
However, eligibility must be established before that protection applies.
A taxpayer who is already under audit or investigation concerning the disclosed conduct may not qualify for VDP relief.
If the matter involves an existing criminal tax investigation or potential prosecution, it should be assessed separately and urgently rather than assuming the VDP remains available.
What Happens After the CRA Reviews the VDP Application?
The CRA reviews the application to determine whether the eligibility conditions have been met and what level of relief should apply.
The CRA may request additional information or documents during its review.
Once the review is complete, the CRA communicates its decision in writing.
If relief is granted, the CRA will determine the applicable penalty and interest relief and process the corrected tax information.
If the application is denied or the taxpayer disagrees with the level of discretionary relief granted, additional review options may be available depending on the nature of the decision.
What If the CRA Denies a Voluntary Disclosure Application?
A taxpayer who disagrees with a VDP decision may have access to further administrative or judicial review processes.
Depending on the issue, this may include requesting a second administrative review of the discretionary relief decision.
A taxpayer who remains dissatisfied with a discretionary decision may, in appropriate circumstances, seek judicial review in the Federal Court.
Judicial review is different from the ordinary Notice of Objection and Tax Court appeal process used to challenge tax assessments.
Learn more about our judicial review of CRA decisions.
VDP Applications Involving Foreign Income and Assets
The Voluntary Disclosures Program is frequently relevant where Canadian taxpayers have failed to properly report foreign income, foreign property, or required information returns.
Potential issues can include:
- Foreign employment or business income;
- Foreign investment income;
- Foreign rental income;
- Offshore bank or investment accounts;
- Foreign corporations, trusts, or other entities;
- Unreported capital gains; and
- Failures involving Form T1135 or other foreign reporting obligations.
Foreign disclosures can involve multiple years, complex records, exchange-rate calculations, and significant penalties, making early review particularly important.
VDP Applications for Businesses and Corporations
Businesses may also use the VDP to correct certain historical non-compliance.
Potential matters can include:
- Unreported business income;
- Corporate income tax errors;
- GST/HST that was not charged, collected, reported, or remitted;
- Ineligible input tax credits;
- Payroll and source deduction issues;
- Unfiled information returns;
- Foreign reporting failures; and
- Other historical tax filing errors or omissions.
Business disclosures should be reviewed carefully because the underlying tax, reporting obligations, and potential penalties can differ from personal income tax matters.
Why Work With KR Law Firm on a Voluntary Disclosure?
A VDP application can require careful decisions about timing, eligibility, scope, documentation, and how the circumstances of the non-compliance are presented to the CRA.
- Tax-Focused Legal Representation: Our practice focuses on Canadian tax matters and disputes involving the CRA.
- Eligibility Assessment Before Filing: We assess whether the circumstances appear to satisfy the current VDP requirements before an application is submitted.
- Strategic Disclosure Preparation: We help identify the issues and periods that should be disclosed and organize the supporting record.
- Direct CRA Representation: Once authorized, we can communicate with the CRA throughout the VDP review process.
- Related Tax Advice: Where the disclosure creates an outstanding balance or another tax issue, we can assess the related collection, dispute, or relief options.
Frequently Asked Questions About the Voluntary Disclosures Program
What is the CRA Voluntary Disclosures Program?
The VDP is a CRA relief program that allows eligible taxpayers to correct certain past tax errors or omissions. If accepted, an application may receive penalty relief, partial interest relief, and protection from referral for criminal prosecution concerning the disclosed information.
Does the VDP eliminate the tax I owe?
No. The underlying tax remains payable. The VDP generally provides relief from penalties and part of the interest rather than eliminating the tax itself.
What is the difference between a prompted and unprompted VDP application?
An unprompted application generally occurs before the CRA has identified a specific compliance issue to the taxpayer and normally qualifies for general relief. A prompted application generally follows certain CRA communications or third-party information concerning a specific compliance issue and normally qualifies for partial relief.
How much penalty relief is available under the VDP?
Eligible unprompted applications normally receive 100% relief from applicable penalties. Eligible prompted applications may receive up to 100% penalty relief depending on the circumstances.
How much interest relief is available?
Eligible unprompted applications normally receive 75% relief from applicable interest, while eligible prompted applications normally receive 25% interest relief, subject to the applicable limitation rules.
Can I apply after receiving a letter from the CRA?
Possibly. Under the current VDP rules, receiving CRA communication does not automatically make a taxpayer ineligible. Some applications made after CRA contact may qualify as prompted applications. However, an application generally will not qualify once an audit or investigation relating to the disclosed information has begun.
Can I apply if the CRA is already auditing me?
Generally not for the information that is already the subject of the audit or investigation. VDP eligibility should be assessed carefully if CRA compliance activity has begun.
If you are already under audit, learn more about our CRA audit representation.
Can I make a voluntary disclosure anonymously?
The formal VDP application ultimately requires sufficient identifying information and documentation. However, the CRA permits anonymous pre-disclosure discussions before an application is submitted.
Can a VDP application cover foreign income or offshore assets?
Yes, depending on the circumstances. The program can apply to unreported foreign income, foreign assets, and related information-reporting failures where the eligibility conditions are met.
Can the VDP protect me from criminal prosecution?
If VDP relief is granted, the CRA provides protection from referral for criminal prosecution relating to the information disclosed. Eligibility and timing are therefore particularly important where the conduct may create prosecution risk.
What happens if my VDP application is denied?
Depending on the nature of the CRA’s decision, a taxpayer may be able to request a second administrative review and, where appropriate, seek judicial review in the Federal Court.
Speak With a Voluntary Disclosure Lawyer
If you have unreported income, unfiled tax returns, foreign reporting issues, GST/HST errors, source deduction problems, or other historical tax non-compliance, KR Law Firm can assess whether the Voluntary Disclosures Program may be available.
Timing can be critical, particularly if the CRA has already contacted you or you are concerned that an audit or investigation may begin.
Contact KR Law Firm to Book a Free Consultation with one of our tax lawyers.